Commerce Ministry seeks EC approval for railway FDI proposal

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The Ministry of Commerce and Industry has sought approval of the Election Commission of India to move ahead with its proposal to liberalise the overseas investment policy in railways.

The Cabinet can take a decision on the matter only after the Election Commission's approval.

"As the model of conduct is in force on account of the upcoming general elections, the government has sought the Election Commission's approval on the matter," sources said.

The Department of Industrial Policy and Promotion (DIPP) under the ministry has proposed to relax the foreign direct investment (FDI) policy in certain railway sectors.

The DIPP proposes to allow 100 per cent FDI in high-speed train systems, suburban corridors, high-speed tracks and freight lines connecting ports and mines.

The objective is to attract more FDI into the country and help the Indian Railways modernise sectors where India is yet to develop the requisite technology.

FDI will not be allowed in existing passenger and freight network operations. At present, there is a complete ban on FDI in railways, except in mass rapid transport systems.

According to the proposal, foreign companies would be allowed to pick up 100 per cent stake in the special purpose vehicle that will construct and maintain rail lines connecting ports, mines and industrial hubs with the existing network.

However, the Home Ministry and the Department of Economic Affairs had sounded a note of caution, citing security concerns, especially regarding investments from China.

The Home Ministry maintained in its observations that Chinese investments should be viewed with caution.

The DIPP may also seek the Election Commission's approval to relax FDI norms in the construction sector. The DIPP has proposed easier conditions for developers to exit, among other changes.

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